Subject files

On 3 October 2021, the International Consortium of Investigative Journalists (ICIJ) revealed an unprecedented data leak of records, coming from 14 offshore services firms around the world and documenting the beneficial owners of corporate entities established in secrecy jurisdictions. The Pandora Papers showed notably how high-net-worth individuals are assisted by intermediaries to shield income and assets from fair taxation and scrutiny.

The system of withholding taxes among Member States has remained largely fragmented. This created loopholes that have been abused by taxpayers to avoid taxes and led to significant barriers (double taxation or complex refund procedures) to cross-border investments in the single market. Moreover, investigative journalists revealed how withholding tax procedures are abused through the cum-ex/cum-cum schemes leading to revenue losses estimated at around 140 billion over 20 years.

In line with the European Parliament’s commitment to incorporate a gender perspective in all its activities, the coordinators of the FISC Subcommittee adopted a Gender Mainstreaming Action Plan on 25 May 2021.

On 13 October 2021, the G20 Finance Ministers endorsed a reform of global tax rules, which was previously agreed on by 136 countries within the OECD/G20 Inclusive Framework. This reform would create the possibility to tax multinational companies in a country where they have no physical presence, reflecting the new realities of a digitalised economy (Pillar One), as well as establish a global minimum tax rate of 15% in order to put an end to remaining practices of profit shifting (Pillar Two).

In July 2021, the Commission adopted the “Fit for 55” package which consists of proposals to adapt the EU’s climate, energy, land use, transport and taxation policies with a view to achieve the target of net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. Among these measures aiming at implementing the European Green Deal, two tax-related proposals were presented: A review of the Energy Taxation Directive and the Carbon Border Adjustment Mechanism (CBAM).

Tax avoidance by multinationals costs EU taxpayers up to €190 billion each year. Tax havens offering no or extremely low effective rates are detrimental to the fair collection of tax in Member States and beyond. The European Parliament has repeatedly stressed the need for a review of the EU listing process of non-cooperative jurisdictions for tax purposes to improve its transparency, the criteria used, and the effectiveness of associated defence measures.

Tax evasion and aggressive tax planning not only accentuate inequalities in societies but also distort competition between SMEs and larger companies who can make use of sophisticated tax structures. The fight against harmful tax competition, tax evasion and tax avoidance is one of the priorities of the FISC Subcommittee.

VAT is a key revenue source for governments, accounting for 17.5 % of total tax revenue in the EU27, and one of the own resources of the EU budget. Billions of VAT revenues are lost each year due to tax fraud and inadequate collection systems. The current VAT system, created in 1993 and intended as a transitional system, is fragmented, complex for the growing number of businesses operating cross-border and prone to tax fraud.